The era of graphs and spreadsheets as a way of thinking about analytics is beginning to approach its end. Predictive analytics, along with associated artificial intelligence (AI) and machine learning technologies, are changing the way in which we deal with data. These tools are becoming more accessible, and ‘big data’ thinking is no longer limited to firms with billion dollar budgets.
Predictive analytics provides a glimpse into the future, as well as access to strategic insights that can open up new opportunities. Here are five ways you can put predictive analytics to use, and how you can change the way you think about data.
According to Forrester research, predictive analytics has found three main use cases for dealing with leads. Specifically:
One prominent example of this was covered in the Harvard Business Review, detailing how a Harley Davidson dealership increased sales leads by 2930% using an AI named Albert.
The AI crunched CRM data to identify characteristics and behaviors of previous buyers. It then split them into micro-segments based on those characteristics. For each segment, it tested different combinations of headlines, visuals, and other elements to determine which worked best for each segment.
The value of your lead qualification is highly dependent on the value and quantity of your data. No matter how good your statistical models are, their abilities are still very limited without access to the information that they need to learn about your customers.
In the digital space – particularly if you are not using a CRM – the best place to start with predictive analytics will almost certainly be an integration of Google Analytics and Google BigQuery.
While lead qualification and conversion is the most obvious use-case for predictive analytics, and likely the one worth looking into first, it’s far from the only marketing application of this emerging technology. But virtually any use is going to have customer modeling at its core.
You can divide customer modeling into three basic types: cluster models, propensity models, and collaborative filtering.
Clustering is a way of segmenting customers into groups based on many variables. A cluster model looks for correlations between various attributes and identifies a number of equilibria in which certain types of attributes tend to accumulate. What makes clustering special, compared with traditional segmentation, is the sheer number of variables involved. Clusters often use 30 variables or more, far more than would be possible if you were manually segmenting customers, or even if they were manually segmenting themselves.
Clusters come in three forms:
What’s important to recognize about these clusters is that they enable predictions about which clusters people belong to – even with limited information. If they buy one product with a specific brand, your brand cluster can predict what other brands they may be interested in, rather than just the more obvious recommendation of simply offering everything else by the same brand.
A propensity model is one that makes future predictions about customer behavior based on correlations with other behaviors and attributes. This may be accomplished using regression analysis or machine learning. A good propensity model controls for as many variables as possible so that correlations aren’t confused for causes.
Here are a few examples of propensity models:
Other propensity models include predicting how far through somebody’s lifetime value you are, and how likely they are to convert or buy.
If you’ve seen Amazon’s “customers who liked this product, also liked…” recommendations, you know what type of model this is. At first glance collaborative filtering might sound similar to product-based cluster models, but collaborative filtering is a bit different. Rather than grouping customers by the types of products they are likely to buy, collaborative filters make recommendations based on aggregate behavior.
In other words, this is less about the user’s product preferences and more about the behaviors that products tend to cause for users.
There are three types of collaborative filters:
Working backwards from customer modeling, it’s possible to identify markets for your products that you may not have been aware of. Here are just a few examples of how this use case can play out:
There are a number of ways that you can leverage your customer models to connect prospects with content in ways that move you toward your goals, some of them more obvious than others. Here are a few examples:
As you can see, the number of approaches you can take here grows pretty quickly. Think strategically about how best to put your models to use and make the most of your models.
While some predictive analytics tools can automatically streamline your marketing process and generate results (like Albert did for Harley Davidson), it’s important to remember that human decisions still play a very important part in the process.
Where predictive analytics and related AI tools often fail is in a propensity to ‘over-fit’ the data. They can get stuck at local maximums and minimums, incapable of making the leap to new terrain.
Escaping from traps like these, and making the most of these tools in general, requires you to find strategic insights from within your predictive analytics models.
For example, suppose you discover that a specific piece of content has a tendency to raise your prospects’ propensity scores; any automation you have in place can be applied to customize how your users are marketed to, and push them toward that piece of content. But what predictive analytics can’t tell you is whether there might be other traffic sources you haven’t tried yet that would be a good fit for that content. Using your experience and brainstorming capabilities, you can identify other potential markets for that content, feed them into your model, and see how the exposure changes things.
Your goal in working with these kinds of models must always be to find insights like these and test them to see if the results are as expected. If your model runs on autopilot it will not discover any new opportunities alone.Reblogged 2 minutes ago from searchenginewatch.com